Contemporary Engineering Economics 6th Edition by Chan Park

Exercise 44

Your R D group has developed and tested a computer software package that helps engineers control the proper chemical mix for various process-manufacturing industries. If you decide to market the software, your first-year operating net cash flow is estimated to be $1,200,000. Because of market competition. product life will be about four years, and the product's market share will decrease by 25% each year over the previous year's share.
(a) To protect the erosion of the market share, you need to upgrade the software every year at the expense of $200,000. Is it worth upgrading the software Your interest rate is 15%.
(b) You are approached by a big software house which wants to purchase the right to produce and distribute the software. For what minimum price would you be willing to sell the software